Why Stamp Duty needs reform

April 25, 2024

Ed Mackenzie Smith, Director, shares his thoughts on how Stamp Duty affects property supply.

The issue of property shortage has challenged many buyers over the years. Market conditions change, yet the same problem persists. So, what is behind this?

When Mackenzie Smith launched in 1992, you could drive around any residential street and see many ‘For Sale’ & ‘Sold’ boards. If you drive around the same streets now, you will find ‘For Sale’ boards replaced by builders and trade vehicles.

Stamp Duty used to represent a modest percentage of the overall cost of moving. Subsequent, significant increases in rates from the Government over the last 25 years have contributed to a stubborn lessening of supply. This is because homeowners noticed the gap between what they were selling and buying for had widened considerably. They began to see Stamp Duty as ‘dead money’.

The consequences of this were that more people decided to make home improvements. For homeowners, it seemed as if the cost of the move could be replaced by reinvesting in the current home. With the reduced supply of property to the market coupled with low interest rates, the inevitable increase in property prices followed.

Of course, this is not the only reason for a shortage of property for sale. There is also a slow and cumbersome planning system, historically low interest rates before the last eighteen months, and a more dynamic lettings market have all contributed to this problem.

With so many forces restricting the supply of property for sale, long-term government policy is desperately required to improve supply, rather than impede it.

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